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“Pause, Breathe & Buy More” Is the Market Mantra

Bitcoin breaks new boundaries but more is better as cryptocurrency becomes a divisive tool in the US Presidential race

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After a brief pause, Bitcoin is on the rise again, setting a new record high on the way.

Let's look at the sequence since last week.

At the start of the week, the token reached a two-year high and quickly scaled to surpass its previous peak of $69,000, set in 2021.

Then, it retreated towards $62,000, rose sharply again to breach the $70,000 mark, and quickly eased back.

Now, the largest crypto is back over $72,000, scaling another all-time high.

ETF Power

This year, the token's price has risen for seven weeks in a row and is up by almost 60%, driven mostly by the high demand for Bitcoin ETFs approved in January.

Trading activity in the derivatives market suggests a bullish narrative for the top crypto.

"The path to $100,000 is clear. What we don't need is a catalyst in the form of a regulatory ruling or an unforeseen reason," said the chief investment officer at a large US fund house in Boston.

"Blackrock's decision to add Bitcoin's products to its global allocation fund adds to the clear shift by large institutional investors to adopt crypto into their mainstream securities allocations," added the CIO.

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The options market analytics show that any dips in the short term are driven by profit-taking, but the long-term view remains that the current all-time high levels are just another pit stop along the way to $100,000.

The primary factor behind the recent upswing in price is the optimism around the record-breaking influx of capital into newly minted spot Bitcoin ETFs.

Since they started trading on January 11, the nine new exchange-traded funds have witnessed net inflows of almost $10 billion.

On the other hand, Ether rose above $4,000 in hopes of being approved for Ether ETFs.

"Almost every trade seems to be getting your hands on anything crypto. Whether it is Bitcoin, Ether or a crypto junk like memecoins," said a digital assets strategist at a large asset management firm in London.

"Ether is sure to follow the Bitcoin way once the SEC approves ETFs for the second-largest token," added the strategist.

US Presidential Crypto Race

The crypto gains came even as global stocks traded broadly lower ahead of a key report on US inflation. 

Bitcoin's strength is even proving enough to convert former US President Donald Trump. Speaking to CNBC, Trump said that if he were to be elected president again, he would not crack down on digital assets.

“I have seen there has been a lot of use of that,” Trump said, referring to the digital currency. “And I’m not sure that I’d want to take it away at this point,” he added.

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Although Trump describes himself as a traditionalist who, “used to say, ‘I want one currency, I want the dollar. I don’t want people leaving the dollar,’” he has been impressed with cryptocurrency's ability to amass wealth.

Speaking about a new line of Trump-branded sneakers, he said, “I noticed that so many of them were paid for with this new currency … you know, cryptocurrency and I couldn’t believe the amount.”

Trump clarified that whilst he does not own any Bitcoin, he would allow people to use the cryptocurrency for purchases.

It's a far cry from his original message back in 2019 when Trump said he wasn't a fan of Bitcoin and when he called it a "scam" that threatened the US dollar in 2021.

Meanwhile, incumbent President Joe Biden has proposed a crypto-mining tax, which the administration believes could generate $10 billion in 2025, and north of $42 billion over the next decade.

The initiative aims to "close a loophole that benefits wealthy crypto investors, and end a tax break for corporate jets."

"A crypto investor – unlike an investor in stocks or bonds – can sell a cryptocurrency at a loss, take a substantial tax loss to reduce their tax burden, and then buy back that same cryptocurrency the very next day," the proposal explains.

"The Budget eliminates this tax subsidy for cryptocurrencies by modernizing the tax code’s anti-abuse rules to apply to crypto assets just like they apply to stocks and other securities."

Last week, crypto mining hit a new daily revenue record of $78.5 million.

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